Benefit of inventory in inheritances in the Balearic Islands
The benefit of inventory allows you to accept an inheritance while keeping the deceased’s estate separate from your personal assets. It is a key tool when there are doubts about debts, guarantees, businesses or mortgaged properties and you want to protect your family assets without automatically renouncing the inheritance.
What the benefit of inventory is and what it is for
Accepting with benefit of inventory means that the heir is only liable for the deceased’s debts up to the value of the inherited assets. It prevents a healthy personal estate from being dragged down by an indebted or unclear inherited estate.
- Separation of estates: the deceased’s assets and the heir’s assets remain legally differentiated for liability purposes.
- Order in management: it forces you to draw up an inventory of assets and debts, giving a realistic picture of the estate before taking final decisions.
- Protection against surprises: if debts appear, the limit is the value of the inheritance, not your personal assets.
When it is advisable to accept with benefit of inventory
It is not always necessary to resort to the benefit of inventory, but there are scenarios where it is prudent to consider it from the outset:
- Significant doubts about debts or guarantees of the deceased (loans, credit facilities, personal guarantees, etc.).
- Companies, businesses or shareholdings with liabilities or potential risks that have not yet been fully quantified.
- Mortgaged properties or assets with encumbrances that may absorb a large part of the value of the estate.
- Contentious estates or those with foreseeable litigation, where claims by third-party creditors are likely to arise.
- Situations where the heir wishes to avoid a total repudiation but cannot accept unlimited risk for unknown debts.
At Cantallops Legal we analyse the balance between assets and liabilities to help you decide between simple acceptance, acceptance with benefit of inventory or even repudiation of the inheritance.
Deadlines and how to exercise the benefit of inventory
The benefit of inventory is not just a label for the estate, but a regime with formal and time-limit requirements. It is important not to miss deadlines or carry out acts that may be interpreted as simple acceptance in fact.
- The decision to make use of the benefit of inventory must be expressed by means of a formal declaration, usually in a public notarial deed or before the competent court.
- A full inventory of the estate’s assets, rights and debts must be opened and completed, following the order and deadlines laid down by law.
- Certain acts of disposition or management of estate assets, if carried out without respecting the regime, may be treated as simple acceptance.
In practice, it is advisable to coordinate the civil strategy (type of acceptance) quickly with the tax strategy (inheritance tax, local capital gains, etc.), avoiding contradictions and making use of the available allowances and reductions in the Balearic Islands.
Practical effects: creditors and the heir’s liability
Once the inheritance has been accepted with benefit of inventory and the inventory has been drawn up, the relationship with creditors works differently from simple acceptance:
- The deceased’s creditors are paid out of the inventoried assets, in accordance with the legal order and ranking of claims.
- The heir is obliged to manage the estate assets correctly and provide an account, avoiding any confusion with his or her own property.
- If the estate assets are not sufficient to pay all debts, the heir does not have to contribute personal assets provided the benefit of inventory regime has been properly observed.
At Cantallops Legal we help you organise the inventory, payments and communication with creditors, leaving a solid file from both a civil and tax law standpoint.
Common mistakes when dealing with the benefit of inventory
- Delaying the decision and carrying out acts that are interpreted as simple acceptance.
- Failing to properly document the inventory of assets and debts, which makes it harder to defend yourself against creditors or the tax authorities.
- Forgetting to coordinate the benefit of inventory with inheritance tax allowances and local capital gains tax.
- Assuming that the benefit of inventory is unnecessary because there is “100% inheritance tax relief”, confusing taxation with civil liability for debts.
For a complete picture, you may also be interested in our guide on inheritance tax allowances in the Balearic Islands and the guide on ISD deadlines